The U.S.-China Trade War’sImpact on APAC Supply Chains

Introduction

In recent times, there has been an increased tension due to the U.S.-Chinese trade relations as both countries have imposed tariffs on their respective imports of goods. The actions of the world’s twomajor economies has had a global impact. As per the recent estimation from IMF, the global economy might see a slowdown by 0.5percentpoints in the coming year. China is the largest source of imports and the third largest export market for the U.S.,right behind Canada and Mexico. The large-scaletrade tensions between China and the U.S.has an impact onthe value chain across numerous industries in other countries.

If the trade war continuesbetween the twocountries,the global GDP is expected to take a hit of $600 billion in 2021, the year of peak impact. A drop in China’s export to the U.S.would significantlyimpact countries such as Taiwan, South Korea,and Malaysia—key countries that support Asia’s export supply chain. The hit would be around 1.6percentfor Taiwan whose output is tied up to China’s exports to the U.S.,comprising mainly computer and electronics industries,accounting for the largest share;and 0.8percentand 0.7percentfor South Korea and Malaysia,respectively.On the other hand, countries to be affected most bytheU.S.exports to China include Canada and Mexico. An escalating trade has an impact on foreign exchange markets by shifting trade flows.